Thursday, September 27, 2018

Brace yourself for higher fares in the coming festive season. Airlines fear oil marketing companies (OMCs) may hike aviation turbine fuel (ATF) price — which is anyway among the highest in India for domestic flights — in next 3-4 days due to the Centre's decision to levy 5% basic customs duty on jet fuel.

Indian carriers say their operating cost has risen significantly in past few months due to the rupee's crash and rising fuel price and they have so far not been able to pass on the same to flyers in form of increased prices because of intense competition. But now not rising fares, they say, could lead to more airlines becoming like the financially struggling Air India and Jet Airways. The peak travel season which is going to start shortly could see higher spot fares, say officials.
The fear of further increase in ATF prices sent share prices of the three listed airlines' to fresh 52-week lows on Thursday. The scrips of IndiGo, Jet Airways and SpiceJet touched a new low of Rs 818.55, Rs 173.15 and Rs 66.70, respectively, during intra-day trade on BSE Thursday.

Indian carriers do not import jet fuel, except IndiGo which does so in a small quantity. A senior airline official said: "India is surplus in ATF and exports it. IOC and MRPL export from Paradip and Mangalore, respectively. But this move (of levying customs duty) will benefit oil marketing companies (OMC) as they price ATF for Indian domestic carriers on import parity pricing method. So even if they do not import this fuel, they will factor this in their pricing structure and charge Indian carriers 5% extra. Foreign airlines would not be affected as their pricing is based on transparent international prices."
27/05/18 Saurabh Sinha/Economic Times